Hong Kong Stocks Due For Positive Correction

(RTTNews) - Borrowing heavily some negative sentiment from mainland China while the Olympics were in Beijing, the Hong Kong stock market has finished lower in four of the last five sessions while sinking to a fresh one-year low. Now after sitting out Friday's trading day because of Typhoon Nuri, the Hang Seng Index is called to bounce back to the upside on Monday, following the rest of the region to the upside.

The global forecast for Monday is broadly positive, thanks to a sharp decline in the price of crude oil. Good news out of the U.S. financial sector also helped to allay concerns about the health of the world's largest economy, which was enough to send Wall Street higher. Also, many of the Asian markets are embroiled in lengthy losing streak, which may make share pries very interesting to the bargain hunters.

The Hang Seng finished sharply lower on Thursday, dragged to the downside as the financials and property stocks fell under heavy selling pressure. Oil refiners and airlines also finished the session significantly lower.

For the day, the index dumped 539.20 points or 2.6 percent to close at 20,392.06 after trading between 20,350.48 and 20,762.65 on turnover of 55.74 billion Hong Kong dollars.

Among the decliners, Cheung Kong (Holdings) dropped 2.8 percent, while Hang Lung Properties dropped 3.2 percent, Sino Land slid 4.5 percent, HSBC fell 2.6 percent, Bank of East Asia retreated 5.2 percent, Foxconn International Holdings tumbled 11.4 percent, Li & Fung skidded 3.7 percent, China Citic Bank declined 2.6 percent, China Petroleum and Chemical Corp fell 3.7 percent, PetroChina dropped 2.5 percent, Cathay Pacific Airways fell 1.8 percent, China Eastern Airlines plunged 7.1 percent, Hutchison Whampoa fell 1.3 percent, China South Locomotive & Rolling Stock Corp was up 1.2 percent, PICC Property and Casualty fell 2.8 percent, phone operator PCCW retreated 4 percent and Hong Kong Exchanges and Clearing was down 2.6 percent.

Wall Street offers a sharply positive lead as stocks turned in a standout performance on Friday, after a sharp drop in oil prices prompted investors to look for bargains. Strength in the financial sector also contributed to the buying interest on Wall Street.

Investors were encouraged when oil prices pulled back sharply during the day, more than offsetting the price increase in the previous session. The pullback by the price of oil was partly due to a rebound in the value of the U.S. dollar. After ending Thursday's trading up $5.62 at $121.18 a barrel, crude for October delivery closed down $6.59 at $114.59 a barrel.

Meanwhile, state-run Korea Development Bank is considering the acquisition of Lehman Brothers (LEH | Quote | Chart | News | PowerRating), according to various reports on Friday. Korea Development Bank, or KDB, reportedly said it is open to mergers or acquisitions of both domestic and foreign companies to cover up its weak areas as the Korean government intends to privatize the company by 2012.

Also, Federal Reserve Chairman Ben Bernanke spoke at the Federal Reserve Bank of Kansas City's Annual Economic Symposium in Jackson Hole, Wyoming earlier in the day, calling the current policy and economic environment "one of the most challenging" in recent memory. "Although we have seen improved functioning in some markets, the financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," Bernanke said.

The major averages saw notable gains throughout the session, closing just below their intraday highs. The Dow closed up 197.85 points or 1.7 percent at 11,628.06, the Nasdaq closed up 34.33 points or 1.4 percent at 2,414.71 and the S&P 500 closed up 14.47 points or 1.1 percent at 1,292.19. For the week, The Nasdaq was down 1.5 percent, while the Dow and the S&P 500 posted weekly losses of 0.3 percent and 0.5 percent, respectively.

In economic news, Hong Kong's Census and the Statistics Department said annual inflation rose to 6.3 percent in July from 6.1 percent in June. Economists were looking for the rate to slow to 6 percent. According to the statistical office, rise in prices of fresh vegetables and private housing rentals pushed up annual inflation. The government expects the improvement in labor productivity and the expected moderation in the rate of economic growth in the period ahead to provide some alleviation effect.

In corporate news, the government of Australia has given its approval to China-based Chinalco's acquisition of a stake in mining giant Rio Tinto. Australian Treasurer Wayne Swan issued a statement Monday approving the purchase. The Chinese aluminum producer bought a 9 percent stake in Rio in March, and seeks to increase the share to 11 percent. Swan's approval came with the stipulation that it would not increase its holdings in Rio Tinto further without government approval and that it would not seek to appoint a director to the Rio Tinto board unless its stake ever rose to 15 percent or more.

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